Professor Mead is pretty good at getting to the essence of the problem in many areas, yet after massive coverage of this issue, he has yet to spell out a very simple solution to this problem. If student debt were to become dischargeable in bankruptcy court – say after 10 years, to prevent people from wiping the slate clean right after graduation – this whole house of cards will collapse. Bankruptcy is a feedback mechanism that corrects malinvestment, and it’s cleansing power is sorely needed in this area.

Colleges don’t have an incentive to lower costs because naive students can “afford” to pay the ridiculously high tuition by borrowing themselves rich. Bankruptcy will put an end to this disgraceful situation. And btw folks: I don’t have a dime in student debt.

David Wall

It wasn’t that long ago when anyone who did not have the money to pay for their college tuition was compelled to convince others to help them: a relative or friend willing to do so, a banker who is convinced of repayment, or a college that was willing to give up some or all tuition in hopes of getting a student they wanted–usually for the academic or athletic status the student brought with them. All giving was voluntary and done with free choice.

The immoral and impractical system we have now is a direct result of loans coming from tax money–others people’s, complete strangers’, money. Millions of tax payers who have no say so in the decision to approve the individual’s loan or not.

The results of the current system are horrific–as any serious person can see. But the only effective argument against the current college loan system is a moral argument. It doesn’t matter if it leads to crippling student debt, a concomitant inflation in tuition rates or not–which it obviously has. Lamenting the terrible result we have now, like this article does, without giving a solution based upon the moral principle involved is fruitless.The proper argument against and the proper solution is to say government has no moral justification in giving out student loans, and it should stop doing it.

Anthony

Very good points. If the debt were dischargable in bankruptcy, the government and private lenders were get out of the educational lending business, and fast.

Anthony

Sometimes I think that people with a massive amount of student debt,
which is a small but real minority of students, should leave the country
and never come back. Males in this group should give very serious
consideration to joining the french foreign legion, which provides a new
name and french passport after five years service.

Jane the Actuary

Making student debt discharable won’t have anything like a positive effect if the government continues to guarantee the loans!

But in any case, this is a really disturbing business model. The parents they’re trying to attract, the ones paying full-freight, they imagine to be so wealthy that money’s no object, but I simply can’t believe that’s true. I look at the formula, I see that they penalize savers, so that the ones with the high Expected Family Contribution are likely to be exactly those who watch their pennies, and I can’t imagine that my family stands alone, and everyone else will happily fritter away their hard-earned money to give Junior a dorm room with granite countertops. http://janetheactuary.blogspot.com/2013/08/heres-another-thing-that-bugs-me-about.html